Surge in FHA Foreclosure Starts And Rising Delinquency In 2nd Quarter

The one-to-four family residentialrndelinquency rate shot up 18 basis points during the second quarter to a seasonallyrnadjusted rate of 7.58 percent of all mortgage loans outstanding according to thernMortgage Bankers Association (MBA).  Thernnew rate is still 86 basis points below that in the second quarter of 2011.  The group’s National Delinquency Survey releasedrnthis morning put the unadjusted rate at 7.35 percent, 41 basis points higherrnthan the 6.94 rate in the first quarter. rnAccording to MBA, delinquency rates typically increase during thernquarter 1-quarter 2 time period.  Thernrate reflects mortgages that are at least 30 days past due but not inrnforeclosure.  </p

During the quarter foreclosure actionsrnwere started against another 0.96 percent of mortgages, the same rate as in bothrnthe previous quarter and one year earlier. rnLoans in some stage of foreclosure now total 4.27 percent of activernmortgages, down 12 basis points quarter over quarter and 16 basis points lowerrnthan in the same period in 2011.</p

The total of delinquent loans and loansrnin foreclosure is now 11.62 percent, 29 basis points higher than in Quarter 1rnand 92 basis points lower than one year earlier. </p

The quarterly increase hit almost allrnloan types and most measures of delinquency (30, 60, and 90 days or inrnforeclosure) within those loan types on both a seasonally adjusted andrnunadjusted basis.  Delinquency figuresrngiven here are seasonally adjusted and foreclosure inventory numbers arernunadjusted.  Changes are in basis points</p<table border="1" cellpadding="0" cellspacing="0"<tbody<tr<td rowspan="2" valign="top" width="128"

Loanrn Type</p</td<td colspan="2" valign="top" width="255"

Delinquency Rates (SA)</p</td<td colspan="2" valign="top" width="255"

Foreclosure Inventory (NSA)</p</td</tr<tr<td valign="top" width="128"

 </p

Q1 – Q 2 Change</p</td<td valign="top" width="128"

Q2, 2011 – Q2, 2012 Change</p</td<td valign="top" width="128"

 </p

Q1 – Q2 Change</p</td<td valign="top" width="128"

Q2, 2011 – Q2, 2012 Change</p</td</tr<tr<td valign="top" width="128"

Primern FRM</p</td<td valign="top" width="128"

 17  </p</td<td valign="top" width="128"

(50)</p</td<td valign="top" width="128"

(17) </p</td<td valign="top" width="128"

(14)</p</td</tr<tr<td valign="top" width="128"

Primern ARM</p</td<td valign="top" width="128"

14 </p</td<td valign="top" width="128"

(257)</p</td<td valign="top" width="128"

(45)</p</td<td valign="top" width="128"

(85)</p</td</tr<tr<td valign="top" width="128"

Subprimern FRM</p</td<td valign="top" width="128"

52</p</td<td valign="top" width="128"

(277)</p</td<td valign="top" width="128"

(33)</p</td<td valign="top" width="128"

(86)</p</td</tr<tr<td valign="top" width="128"

Subprimern ARM</p</td<td valign="top" width="128"

44</p</td<td valign="top" width="128"

(458)</p</td<td valign="top" width="128"

(43)</p</td<td valign="top" width="128"

(111)</p</td</tr<tr<td valign="top" width="128"

FHA</p</td<td valign="top" width="128"

(11) </p</td<td valign="top" width="128"

(73)</p</td<td valign="top" width="128"

40</p</td<td valign="top" width="128"

99</p</td</tr<tr<td valign="top" width="128"

VA</p</td<td valign="top" width="128"

8</p</td<td valign="top" width="128"

(40)</p</td<td valign="top" width="128"

(2)</p</td<td valign="top" width="128"

(18)</p</td</tr<tr<td valign="top" width="128"

Allrn Loans</p</td<td valign="top" width="128"

18</p</td<td valign="top" width="128"

(86)</p</td<td valign="top" width="128"

(12)</p</td<td valign="top" width="128"

(16)</p</td</tr</tbody</table

Jay Brinkmann, MBA’s Chief Economistrnsaid, “Mortgage delinquencies were up only slightly over the last quarter.  Perhaps more important than the small size ofrnthe increase, however, is the fact that it reversed the trend of fairly steadyrndrops in delinquencies we have seen over the last year.  This is consistent with the slowdown in therneconomy during the first half of the year and our stubbornly high unemploymentrnrate.  Whether this is just a temporaryrnblip or a sign of a true change in direction for mortgage performance willrnfundamentally depend on the direction of employment over the remainder of thernyear.”</p

Brinkmann said that the rate of newrnforeclosure filings was down for most loan types but a surge in FHA foreclosurernstarts overwhelmed those numbers.   “Thisrnquarter’s rate set an all-time record for FHA loans, but it was only slightlyrnhigher than the previous high set in 2010. rnThe jump was due to one or more large servicers of FHA loans restartingrnforeclosure actions on delinquent FHA loans after the completion of thernDepartment of Justice review and the mortgage servicing settlement.  It does not, however, represent a significantrndecline in FHA performance.  These loansrnhad been considered seriously delinquent for some time and have now been movedrnfrom the 90-plus day delinquency bucket to the in-foreclosure bucket, withrnlittle net change.”</p

Brinkmann said that Maryland had thernhighest rate of new foreclosure actions, more than double the nationalrnaverage.  Maryland’s statistic was also arnfactor of the resumption of activity after the servicing settlement.  Maryland’s surge in foreclosure starts wasrnmatched by the biggest drop of all states in the number of its loans that were 90rndays or more past due.  Washington wasrnanother state where new rules that delayed foreclosures earlier are nowrnresulting in statistical bulges as activity resumes.</p

Florida continues to lead the nationrnwith 13.7 percent of mortgages in foreclosure, more than triple the nationalrnaverage, followed by New Jersey at 7.7 percent, Illinois at 7.1 percent, andrnNew York at 6.5 percent.  In contrast,rntwo of the states that were hardest hit, Arizona and California, now have ratesrnof 3.2 and 3.1 percent respectively, both more than a full percentage pointrnlower than the national average.

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